NOTE 14: SHARE-BASED COMPENSATION

The Company issues stock options, restricted shares, restricted share units and shares with performance features to employees under share-based compensation plans, which are described herein.

Compensation expense for stock options and restricted stock awards is measured at fair value on the date of grant based on the number of shares granted. Beginning in 2015, the fair value of stock options is estimated based on the Trinomial lattice pricing model; the fair value of restricted shares is based on the quoted market price on the date of the grant. Stock option expense is recognized using the straight-line attribution basis over the entire vesting period of the award. Restricted share, restricted share unit and performance share expense is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. Expense is recognized net of estimated forfeitures.

Compensation expense for restricted shares, including shares with performance features, is measured at fair value on the date of grant based on the number of shares granted and the quoted market price of the Company's common stock. Such value is recognized as expense over the vesting period of the award, net of estimated forfeitures.

Compensation expense for restricted share units with performance features and a market condition is measured at fair value, subject to the market condition on the date of grant and based on the number of shares expected to vest subject to the performance condition. Such value is recognized as expense over the vesting period of the award, net of estimated forfeitures.

During 2014, the Company's Compensation Committee approved the continued vesting of unvested options and restricted stock awards without any required service period or the accelerated vesting of such awards for former employees, including former executive officers, upon their separation from the Company. Compensation expense related to the Company's share-based payment awards totaled $25.6 million, $37.3 million and $7.3 million for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively. Compensation expense included $0.3 million, $17.3 million and $2.8 million for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively, that was classified as restructuring.

Stock Plans

In March 1992, March 2000, March 2002, March 2005, May 2011 and May 2013 the Company adopted the "1992 Plan," the "2000 Plan," the "2002 Plan," the "2005 Plan," the "2011 Plan" and the "2013 Plan" respectively, under which options (both nonqualified options and incentive stock options) to acquire shares of common stock may be granted to officers, other key employees, consultants and outside directors, in each case as selected by the Company's Compensation Committee (the "Committee"). Payment by option holders upon exercise of an option may be made in cash or, with the consent of the Committee, by delivering previously acquired shares of Company common stock or any other method approved by the Committee. If previously acquired shares are tendered as payment, the shares are subject to a six-month holding period, as well as specific authorization by the Committee. To date, this type of exercise has not been approved or transacted. The Committee has the authority under all of the plans to allow for a cashless exercise option, commonly referred to as a "broker-assisted exercise." Under this method of exercise, participating employees must make a valid exercise of their stock options through a designated broker. Based on the exercise and information provided by the Company, the broker sells the shares on the open market. The employees receive cash upon settlement, some of which is used to pay the purchase price. Neither the stock-for-stock nor broker-assisted cashless exercise option are generally available to executive officers or directors of the Company. Although there are none currently outstanding, stock appreciation rights may be granted in connection with all or any part of any option granted under the plans and may also be granted without a grant of a stock option. Vesting schedules will be accelerated upon a change of control of the Company. Options and stock appreciation rights generally may not be transferred during the lifetime of a holder.

Awards under the 2002 and 2005 Plans may also be made in the form of dividend equivalent rights, restricted stock, unrestricted stock performance shares and restricted stock units. Exercise prices for awards under the 2000, 2002, 2005, 2011 and 2013 Plans are determined by the Committee; to date, all stock options have been granted at an exercise price not less than the closing market value of the underlying shares on the date of grant.

Awards granted under plans no longer in use by the Company, including the 2005, 2002, 2000 and 1992 Plans, remain in effect in accordance with their terms. The 2011 Plan provides for the issuance of up to 3.0 million shares of common stock, of which no more than 1.5 million shares may be awarded pursuant to grants of restricted stock, restricted stock units, unrestricted stock and performance shares. The 2011 Plan expires in 2021. The 2013 Plan provides for the issuance of up to 9.5 million shares of common stock. The 2013 Plan expires in 2023. As of January 2, 2016, 7.6 million shares were available for future grant under the 2011 and 2013 Plans.

The Company delivers treasury shares upon the exercise of stock options and vesting of restricted shares. The difference between the cost of the treasury shares and the exercise price of the options has been reflected on a first-in, first-out basis.

Stock Options

The Company grants stock options to certain domestic and international employees. These options are subject to transfer restrictions and risk of forfeiture until earned by continuing employment. Stock options are issued at the current market price and have a three-year vesting period and a contractual term of 7-10 years.

Beginning in 2015, the Company utilizes the Trinomial lattice pricing model to estimate the fair value of options granted. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates and to allow for actual exercise behavior of option holders.

	Fiscal Year Ended
Valuation Assumptions:	January 2, 2016	December 28, 2013
Weighted-average fair value of options granted	$15.92	$10.32
Expected volatility	76.5%	59.5%
Weighted-average volatility	58.7%	59.5%
Expected term (in years)	4.2	4.9
Dividend yield	—	—
Risk-free rate	1.9%	0.1% to 3.9%
Expected annual forfeiture	15.3%	12.4%

Expected volatilities are based on a term structure of implied volatility, which assumes changes in volatility over the life of an option.

The Company utilizes historical optionee behavioral data to estimate the option exercise and termination rates that are used in the valuation model. The expected term represents an estimate of the period of time options are expected to remain outstanding. The expected term provided in the above table represents an option weighted-average expected term based on the estimated behavior of distinct groups of employees who received options in 2015 and 2013. The range of risk-free rates is based on a forward curve of interest rates at the time of option grant.

A summary of award activity under the Company's stock option plans as of January 2, 2016 and changes therein during the fiscal year then ended are as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (In thousands)
Outstanding January 3, 2015		1,030,969		$	11.25		3.9	$	21,613
Granted		174,458			34.29
Exercised		(244,780	)		10.07				5,869
Cancelled/expired		(54,764	)		22.08

Outstanding at January 2, 2016		905,883			15.35		3.4	$	5,686


Vested or expected to vest at January 2, 2016		873,924			14.68		3.4	$	5,686
Exercisable at January 2, 2016		573,593			8.12		2.4	$	5,686

The intrinsic value per option exercised was $23.98, $24.62 and $16.46 for the fiscal years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively.

As of January 2, 2016, there were approximately 0.3 million nonvested stock options with a weighted average exercise price of $13.20 and there was $2.2 million of total unrecognized compensation cost related to nonvested stock options granted under the Company's stock option plans. That expense is expected to be recognized over a weighted average period of 1.3 years. The total fair value of shares vested for the years ended January 2, 2016, January 3, 2015 and December 28, 2013 was $2.3 million, $3.2 million and $4.9 million, respectively.

Restricted Stock

The Company grants restricted shares and restricted share units to certain domestic and international employees. These shares are subject to transfer restrictions and risk of forfeiture until earned by continued employment. These shares generally vest 50% on the second anniversary date from the date of grant and 50% on the third anniversary date from the date of grant.

The Company grants performance shares to certain of its employees, including the Company's executive officers. Performance shares are earned based on the achievement of certain profit or other targets aligned with the Company's strategy.

In 2015, the Company granted 105,245 market share units ("MSUs") to a group of key executives with an aggregate grant date fair value of $4.6 million and which vest 50% on each of the second and third anniversaries of the grant date as part of an annual long-term incentive plan ("LTIP"). The MSUs earned will vary from 30% to 200% of the number of MSUs awarded depending on the actual performance of the Company's stock price over the vesting periods.

In 2014, the Company granted 1,291,487 MSUs to a group of key executives with an aggregate grant date fair value of $64.9 million as staking grants ("Staking Grants") and as part of an annual LTIP. The Staking Grants have a grant date fair value of $54.8 million and vest 50% on the third anniversary of grant and 50% on the fifth anniversary of grant. The MSUs included in the LTIP represent a portion of the awards granted under that plan, have a grant date fair value of $10.1 million and vest 50% on each of the second and third anniversaries of the grant date. The MSUs issued as Staking Grants and as part of the LTIP have a minimum earnout of 30% of target. The MSUs earned will vary from 30% to 200% of the number of MSUs awarded depending on the actual performance of the Company's stock price over the vesting periods.

The fair value for the MSUs granted was calculated using the Monte Carlo simulation model. For the years ended January 2, 2016 and January 3, 2015, the following assumptions were used in determining fair value:

	Fiscal Years Ended
Valuation Assumptions:	January 2, 2016	January 3, 2015
Weighted-average fair value	$43.35	$50.24
Expected volatility	43.2%	52.3%
Dividend yield	—	—
Risk-free rate	1.1% to 1.7%	1.68%
Weighted-average expected annual forfeiture	5.0%	4.8%

In 2015, the other portion of the LTIP consists of an award of 243,419 performance shares that vests on the third anniversary of the grant date. The number of performance shares earned will vary from zero to 200% of the number of awards granted depending on the Company's Total Shareholder Return ("TSR") relative to the TSR of the S&P Mid-Cap 400 Index as well as an earnings-based performance condition. The performance shares have a grant date fair value of $9.1 million that was calculated using a Monte Carlo simulation model.

In 2014, the other portion of the LTIP consists of an award of 202,541 performance shares that vests on the third anniversary of the grant date. The performance shares have a grant date fair value of $8.9 million that was calculated using a Monte Carlo simulation model.

For the years ended January 2, 2016 and January 3, 2015, the following assumptions were used in determining fair value:

	Fiscal Years Ended
Valuation Assumptions:	January 2, 2016	January 3, 2015
Weighted-average fair value	$37.47	$43.93
Expected volatility	41.6%	44.2%
Dividend yield	—	—
Risk-free rate	1.0%	0.7%
Weighted-average expected annual forfeiture	4.1%	4.0%

Each of the Company's non-employee Directors received an annual grant of shares of common stock with a value of $100,000 as part of an annual retainer for serving on the Board of Directors, with the exception of the Chairman of the Board, who received an annual grant of shares of common stock with a value of $150,000. Retainer shares are non-transferable until the first anniversary of the grant, with 25% becoming transferable on each of the first and second anniversary of the grant and 50% becoming transferable on the third anniversary, subject to certain exceptions.

A summary of award activity under the Company's restricted stock plans as of January 2, 2016 and changes therein during the fiscal year then ended are as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested stock at January 3, 2015		1,719,574		$	45.39
Granted		570,484			36.87
Vested		(112,720	)		20.07
Cancelled		(253,088	)		45.67

Nonvested stock at January 2, 2016		1,924,250		$	44.31


Expected to vest as of January 2, 2016(a)		1,751,883		$	44.52


(a)	Excludes the potential impact of the performance share multiplier, which will vary from 30% to 200% of the number of MSUs awarded depending on the actual performance of the Company's stock price over the vesting periods and zero to 200% of the number of LTIP awards granted depending on the Company's TSR relative to the TSR of the S&P Mid-Cap 400 Index.

The weighted average grant date fair value of restricted shares granted in the years ended January 2, 2016, January 3, 2015 and December 28, 2013 was $36.87, $48.05 and $21.79, respectively.

As of January 2, 2016, there was $37.9 million of total unrecognized compensation cost related to nonvested stock awards granted under the restricted stock plans. That expense is expected to be recognized over a weighted average period of 2.0 years. The total fair value of shares vested during the years ended January 2, 2016, January 3, 2015 and December 28, 2013 was $2.3 million, $6.9 million and $1.6 million, respectively.